NFTs are experiencing massive growth and generate as much interest as questioning, particularly in the context of the artistic and cultural industries.

Prior considering the prospects that NFTs offer to the audiovisual sector, it is essential to consider  the definition of NFTs and cryptocurrencies.

Definition

« NFT » is the acronym for Non-Fungible Token.

An NFT is then a unique digital token, which cannot be replaced or exchanged with another token.

As such, it differs from  cryptocurrencies such as “Bitcoin’”  that are perfectly exchangeable with each other and constitute a digital currency independent of the banking network and secured by cryptage (« blockchain »).

In order to secure transactions, an NFT is certified by a « blockchain », i.e. a secure technology for storing and transmitting information directly and transparently in a distributed ledger preventing any falsification.

NFTs can then represent an intangible thing, a physical object, or specific rights.

NFTs are used in various environment, for commercial or artistic purposes and for digital representations of objects to be used in a video game; virtual spaces to be acquired in fictional « metaverse » worlds; various artworks …

In this respect, the common language often confuses NFTs, a digital element embedded in the blockchain, and the content and data on which they relate (images, sounds, etc.).

Perspectives and initiatives of the film and audiovisual industry

NFTs can be considered in the context of the exploitation of audiovisual works but also of their financing.

NFTs are thus mobilized as part of the marketing/merchandising of films and we can highlight the operations of Warner Bros.  which has issued 100,000 NFTs about Matrix’s licesne on the Nifty’s platform  or the Veve platform  that publishes NFTs with the effigy of franchises such as Marvel or Jurassic Park.

If blockbusters are highly visible, initiatives also exist on the side of more modest productions.

Thus, « Claude Lanzmann: Spectres of the Shoah », a British documentary on the shooting of the film « Shoah », was traditionally broadcast and then put on sale in 10  NFT copies for the equivalent of $ 375,000 per NFT.

In France, Logical Pictures, created a subsidiary, Cascade8, specialized in technological solutions. Through this company, a collection of NFT with the effigy of Seth Ickerman’s medium-length science fiction film, Blood Machines, is sold, as merchandising of the film.

Similarly, a collection of NFTs of images from Music Hole, directed by  Gaëtan Liekens and David Mutzenmacher were proposed on Binance in  the form of 12 drawings on sale in 100 copies, each NFT allowing the surplus to attend the premiere of the film at the Grand Rex Theater in Paris. The film’s distributor, Amos Rozenberg, president of Paramax, explained its initiative by indicating that he wanted to federate spectators and set up « an innovative way for us to finance part of the distribution of the film with NFTs ».

Beyond marketing and merchandising, the film « Zero Contact », a thriller made mostly via Zoom with Anthony Hopkins on the cast, was released for the launch of Vuele, a platform for viewing contenu in NFT format.

NFTs are also used as part of fundraising, to accompany or compensate for traditional financing systems. The animated series Stoner Cats has raised about $ 8 million in 35 minute at a price of just under $ 1,000 per ticket.

In addition, producer Niels Juul initiated the creation of NFT Studios with the aim of fully financing the feature film, A Wing and a Prayer, in view of the difficulties of financing independent cinema in the United States.

For this, Niels Juul has partnered with NFT Investments to issue NFTs that offer privileges to their holders: access to shooting locations or preview, voting rights in certain decisions etc.  Jonathan Bixby, head of NFT Investments, defines the initiative in these terms « NFT Studios is like a club, and the NFTs that we sell give you access to the benefits of the club. »

In France, Elisha Karmitz, director of Mk2 also affirmed the interest of the group and observed « with great interest the evolution of the NFT market«  and stressed a « real opportunity to redefine the uses of the Internet and therefore the consumption of content ».

Above all, the DCF (for Diversity of French Cinema), led by Sarah Lelouch and Joël Girod, intends to use NFTs but has also created a specific cryptocurrency, Klapcoin, to finance films and series.

In this context, the amount invested by an investor is converted for 88.5% into Klapcoin, which will serve as production capital and for 11.5% into Lux, NFT, which gives access to rewards: places for previews, meeting with film crews, or voting rights.

The initiative is ambitious, with an announcement of a target of 8 million euros to finance 15 to 20 films or series and a « soft cap » of at least 2 million eurosraised from investors to exist, success is for the moment limited. As of May 31, 2022, only €400,000 had been raised.

In a less generalized manner, the French studios Rooftop Production and Karlab also organized ed a sale of 50,000 NFT to finance the animated film « Plush ». The NFTs offered for sale include both a « Digital Bear » as well as co-production and voting rights. The success of the operation is mixed, but the fundraising reaches about 1.6 million euros.

Creation and sale of NFT

The creation and sale of NFT requires being able to integrate its approach into ane blockchain and to put NFT on sale on a dematerialized platform.

In a simple way, the creation of an NFT is done in two stages, the (more or less) creative part with common tools in digital creation and then the registration of the NFT on a blockchain via a platform.

In this context, many platforms are available and allow to generate NFTs as well as to market them, including Rarible , OpenSea or Pianity.

To generate the NFT, it will then be necessary to connect a « wallet », such as Metamask, wallet used to pay the creation fees in cryptocurrency, among which Ethereum is the most used.

NFTs can be marketed via the platforms or on a dedicated marketplace that can be created via shopify or metaplex.

However, in the context of ambitious and specific projects, it may be wise not to go through the « mainstream » platforms but to develop a solution specific to each project.

In addition, the establishment of NFTs or crypto-currencies implies taking precautions, particularly regarding the legal status of these.

From the point of view of intellectual property, it means distinguishing the NFT from the work it designates or the rights in a work it designates. The NFT itself is not a work of the mind and in the context of an assignment, the scope of exploitation of the rights transferred via the NFT must be expressly determined so that the assignment meets the requirements of the French Intellectual Property Code.

In this context, the status of NFTs necessarily varies according to what they designate – whether they are marketing/merchandising elements, a right of viewing or exploitation or access to film revenues …

The latter are more heavily regulated and require considering the positions of the French Autorité des marchés financiers and the different steps to respect for the issuance of NFTs opening financial rights, more particularly in the context of fundraising.

Finally, the taxation of NFTs is complex: should they be treated as works of art, digital assets, or intangible movable property?

The definitions in force, and those arriving in 2023, do not provide a precise definition of an NFT, nor a fortiori of an applicable regime and it then seems necessary to analyze each NFT to determine which regime applied in the light of what is actually covered in the NFT.

Given the complexity of the subject, it is wise for a producer or distributorwishing to set up NFTs or crypto-currencies to surround himself with the services of a specialized lawyer.